Brian Lenihan Jnr (Dublin West, Fianna Fail)

I refer Deputy Noonan to my reply of 7 December 2010 concerning this matter. In November 2010, following a request from Anglo Irish Bank, the State provided a guarantee to the bank's derivative, repo and clearing type counterparties. These counterparties did not have the benefit of support under any other existing guarantee arrangements.

As with all banks, Anglo Irish Bank is exposed to a number of risks and uncertainties in the normal course of its business activities. I would stress that these exposures relate solely to normal activities of the bank. The bank's balance sheet exposure to these risks, taken together with the risk mitigation provided by derivatives, are managed within risk limits which are approved by the bank's board of directors.

Anglo Irish Bank indicated in late 2010 to the authorities that owing to the bank's financial position and recent rating actions, unguaranteed counterparties required the provision of such a guarantee if they were to continue transacting with the bank. The bank has committed to entering only into arrangements which are to manage balance sheet risks and the bank does not take positions outside the limits approved by the board of directors. The bank has committed to keeping the NTMA regularly informed of the potential exposures arising under the guarantee and the NTMA monitors these exposures to ensure that any risk to the Exchequer is minimised.

The State has incurred no cost arising from this guarantee. The guarantee is a continuing guarantee and can be terminated by the Minister on 90 days' notice.

The European Commission's approval was necessary under state aid rules since the institution was benefiting from a guarantee and hence the reference by the Commission to this matter in its approval of the injection of capital to the bank in December 2010.

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